National Treasury plans to stop taxing you on the capital gains you make when you convert passive currency holdings – such as cash, bank deposits, money market investments and bonds – from one currency into another.
Currently, moving currency holdings to an account in the same currency does not trigger a capital gain or loss. However, if you switch your holdings from one currency into another, you could incur a capital gain or loss for tax purposes.
Even foreign cash you convert back to rands at the end of your travels could result in a capital gain or loss that you need to report on your tax return.
The Budget Review says taxing these gains is impractical. Keith Engel, the chief director of legal tax design at the National Treasury, explains that declaring the capital gain or loss for these transactions requires you to report the base cost converted to rands of each acquisition of the foreign currency cash or bank deposit, and each disposal value converted to rands, but people often do not keep track of this information. Engel says the treasury will propose that the foreign currency losses or gains in these transactions be ignored for tax purposes.
There will be no change to the capital gains or losses on foreign equity or property transactions, as the currency gains or losses are already largely ignored in these, Engel says.